Cla-2 Ot:Rr:Ctf:Tcm H251033 Lwf

HQ H251033

July 31, 2014

CLA-2 OT:RR:CTF:TCM H251033 LWF

CATEGORY: Classification

TARIFF NO.: 8517.62.00

Port Director Service Port of Los Angeles/Long Beach Seaport U.S. Customs and Border Protection 301 E. Ocean Blvd. Long Beach, CA 90802 Attn.: Dirik Lolkus, Senior Import Specialist

RE: Application for Further Review of Protest No. 2704-13-102440; Classification of a wireless stereo headset with microphone and a USB dongle transceiver from China

Dear Port Director:

This is in reference to the Application for Further Review (“AFR”) of Protest No. 2704-13-102440, timely filed on November 20, 2013, by Sony Computer Entertainment America LLC (“SCEA”). The AFR concerns U.S. Customs and Border Protection’s (CBP) classification of a wireless stereo headset with microphone and a USB dongle transceiver under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise at issue is SCEA’s Model No. 98085, “Wireless Stereo Headset for Playstation®3,” a wireless stereo headset with microphone and a USB dongle transceiver (“the Headset”; picture below at Fig. 1). The Headset consists of a pair of dual (circumaural) full size earphones combined in the same housing with a microphone, a radio transceiver, a rechargeable lithium polymer battery, a power input, and LED (light emitting diode) indicator, and controls. The Headset has controls for powering the device on and off, adjusting the main volume, balancing audio and voice levels, and displaying battery power. The adjustable microphone attached to the left earphone possesses a multi-color LED indicator light that provides information on the transmission/reception status and state of battery charge. The Headset is presented in a box for retail sale.

When the USB dongle transceiver is connected to a Playstation®3 videogame console or other automatic data processing (ADP) machine, the Headset transceiver utilizes a wireless connection via 2.4GHz radio frequency with the USB transceiver to transmit voice and audio content between the videogame console and the Headset, thereby allowing a user to listen to audio content from the videogame console or ADP machine and communicate with fellow gamers via the Headset’s incorporated microphone. Additionally, when connected to a Playstation®3 videogame console, the Headset also transmits battery information and audio settings to the console, which displays the information on-screen.

Fig. 1: SCEA’s Model No. 98085, “Wireless Stereo Headset for Playstation®3”

The instant Protest/AFR was timely filed on November 20, 2013 and concerns several shipments of SCEA Headsets, entered between July 12, 2012 and January 2, 2013 at the Service Port of Los Angeles/Long Beach Seaport. CBP liquidated the entries of Headsets under tariff classification subheading 8518.30.20, HTSUS, which provides for “Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: Headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers: Other.” As the basis for classification under subheading

2 8518.30.20, HTSUS, CBP cites to Headquarters Ruling Letter (“HQ”) 950591, dated December 23, 1991, in which CBP classified a cordless, infrared stereo headphone system (without microphone) in subheading 8518.30.20, HTSUS.

SCEA asserts that the Headsets are properly classified under subheading 8517.62.00, HTSUS, which provides for “Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.” In support of its position, SCEA cites to several recent New York Ruling Letters (“NY”) that have classified various wireless headsets in heading 8517, HTSUS.

ISSUE:

Whether the Headsets are classified under heading 8517, HTSUS, as other apparatus for the transmission or reception of voice, images or other data, or under heading 8518, HTSUS, as headphones and earphones, whether or not combined with a microphone.

LAW AND ANALYSIS:

Initially, CBP notes that the matter protested is protestable under 19 U.S.C. § 1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation for entries made on or after December 18, 2004. (Miscellaneous Trade and Technical Corrections Act of 2004, Pub.L. 108-429, § 2103(2)(B)(ii), (iii) (codified as amended at 19 U.S.C. § 1514(c)(3) (2006)). Further Review of Protest No. 2704-13-102440 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24(a), because the decision against which the protest was filed is alleged to be inconsistent with a ruling of the Commissioner of Customs or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise.

Merchandise imported into the United States is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provision of law for all purposes. GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless

3 otherwise required, according to the remaining GRIs taken in their appropriate order. The 2012 and 2013 HTSUS headings under consideration are the following:

8517 Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof: * * * * * 8518 Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets; parts thereof: * * * * * Note 3 to Section XVI, HTSUS, states:

Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only that component or as being that machine which performs the principal function. * * * * * The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System at the international level. While not legally binding, the ENs provide a commentary on the scope of each heading of the HTS and are thus useful in ascertaining the proper classification of merchandise. It is CBP’s practice to follow, whenever possible the terms of the ENs when interpreting the HTSUS. See T.D. 89-90, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

The ENs to Section XVI, provide, in relevant part, as follows:

(VI) MULTI-FUNCTION MACHINES AND COMPOSITE MACHINES

(Section Note 3)

In general, multi-function machines are classified according to the principal function of the machine.

…

Composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutively or simultaneously performing separate functions which are generally complementary and are described in different headings of Section XVI, are also classified according to the principal function of the composite machine. 4 …

For the purposes of the above provisions, machines of different kinds are taken to be fitted together to form a whole when incorporated one in the other or mounted one on the other, or mounted on a common base or frame or in a common housing. * * * * * The EN to heading 85.17, HS, states, in relevant part:

This heading covers apparatus for the transmission or reception of speech or other sounds, images or other data between two points by variation of an electric current or optical wave flowing in a wired network or by electromagnetic waves in a wireless network. The signal may be analogue or digital. The networks, which may be interconnected, include telephony, telegraphy, radio-telephony, radiotelegraphy, local and wide area networks.

…

(II) OTHER APPARATUS FOR TRANSMISSION OR RECEPTION OF VOICE, IMAGES OR OTHER DATA, INCLUDING APPARATUS FOR COMMUNICATION IN A WIRED OR WIRELESS NETWORK (SUCH AS A LOCAL OR WIDE AREA NETWORK) …

(F) Transmitting and receiving apparatus for radio-telephony and radiotelegraphy.

This group includes:

(1) Fixed apparatus for radio-telephony and radio-telegraphy (transmitters, receivers and transmitter-receivers). Certain types, used mainly in large installations, include special devices such as secrecy devices (e.g., spectrum inverters), multiplex devices (used for sending more than two messages simultaneously) and certain receivers, termed “diversity receivers”, using multiple receiver technique to overcome fading.

(2) Radio transmitters and radio receivers for simultaneous interpretation at multilingual conferences.

(3) Automatic transmitters and special receivers for distress signals from ships, aircraft, etc.

(4) Transmitters, receivers or transmitter/receivers of telemetric signals.

(5) Radio-telephony apparatus, including radio-telephony receivers, for motor vehicles, ships, aircraft, trains, etc.

(6) Portable receivers, usually battery operated, for example, portable receivers for calling, alerting or paging. * * * * *

5 The Subheading EN to subheading 8517.62, HS, states:

Subheading Explanatory Note. Subheading 8517.62

This subheading includes cordless handsets or base units, when presented separately. * * * * * In determining whether SCEA’s wireless Headset is appropriately classified in heading 8517 or heading 8518, HTSUS, CBP emphasizes, that GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes. (Emphasis added). Because the instant Headset housing integrates several component pieces that together perform functions in combination with a separate USB transceiver dongle, CBP calls attention to Note 3 to Section XVI, HTSUS, which contains instructions pertaining to the classification of composite machines.

Note 3 to Section XVI, HTSUS, directs that unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole are to be classified as if consisting only of that component or as being that machine which performs the principal function. As described above, the instant Headset consists, in relevant part, of a pair of circumaural, full size earphones that are combined in the same housing with a microphone, and a radio transceiver microchip mounted on a printed circuit board. Together, those components (which are in and of themselves “machines”),1 perform separate but complementary functions described in different headings of Section XVI. See Note 2 to Section XVI, HTSUS; EN(II) to Section XVI, HS. The microphone converts sound waves into electric current. The transceiver receives electrical current from the microphone, converts it into data signals and, in connection with the USB transceiver dongle, transmits those signals via radio waves to the Playstation®3 videogame console. Conversely, the Headset transceiver also converts data signals it receives from the USB transceiver dongle into electric current and transmits them to the Headset’s earphones, where the earphones convert electric current into sound waves. As such, CBP finds that the separate, complementary functions of the earphones, microphone, and transceivers strongly support the classification of the Headset as a composite machine, pursuant to Note 3 to Section XVI, HTSUS.

In accord with Note 3 to Section XVI, HTSUS, the Headset is classified as if consisting only of that component or as being that machine which performs the device’s principal function. CBP has found the analysis developed and utilized by the courts in relation to “principal use” (the “Carborundum factors”) to be a

1 The earphones, microphone, and transceiver microchip are each considered a “machine” for tariff purposes. See Note 5 to Section XVI, HTSUS. 6 useful aid in determining the principal function of such machines. Generally, the courts have provided several factors, which are indicative but not conclusive, to apply when determining whether merchandise falls within a particular class or kind. They include: (1) general physical characteristics; (2) expectation of the ultimate purchaser; (3) channels of trade, environment of sale (accompanying accessories, manner of advertisement and display); (4) use in the same manner as merchandise that defines the class; (5) economic practicality of so using the import; and (6) recognition in the trade of this use. See United States v. Carborundum Co., 63 C.C.P.A. 98, 102, 536 F.2d 373, 377 (1976), cert. denied, 429 U.S. 979 (1976); Lennox Collections v. United States, 20 Ct. Int’l Trade 194, 196 (1996); Kraft, Inc. v. United States, 16 Ct. Int’l Trade 483, 489 (1992); and G. Heileman Brewing Co. v. United States, 14 Ct. Int’l Trade 614, 620 (1990). See also HQ W968223, dated January 12, 2007, and HQ 966270, dated June 3, 2003.

Here, CBP finds that the Carborundum factors, when considered in total, indicate that the principal function of SCEA’s wireless Headset is to receive and transmit radio signals to and from the videogame console or other device to which it is paired. The transmission function, which is performed by the transceivers, enables a user to wirelessly connect to a videogame console or ADP machine to send and receive voice and audio content between the Headset, the videogame console or ADP machine, and other online users. Moreover, CBP finds that the central role of the Headset’s transceivers is reflected in the expectations of the ultimate consumers and the channels of trade by which the Headsets are sold. Specifically, the product name, “Wireless Stereo Headset for Playstation®3” (emphasis added), indicates that the instant merchandise is advertised and distinguished from other, wired headsets by consumers’ recognition of the term “wireless.” As such, CBP concludes that the transceivers perform the principal function of the SCEA wireless Headset, and pursuant to Note 3 to Section XVI, HTSUS, the device shall be classified as if consisting only of the transceivers.

By application of GRI 1, transceivers for the transmission of voice, images, or other data are classified in heading 8517, HTSUS, which provides for, “Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof.” Accordingly, SCEA’s Headset is classified in subheading 8517.62, HTSUS, pursuant to Note 3 to Section XVI, as other machines for the reception, conversion, and transmission or regeneration of voice, images, or other data. See EN 85.17(F); and Subheading EN 8516.62, HS. Classification of the instant SCEA Headset in subheading 8517.62, HTSUS, is consistent with several prior CBP ruling letters that classified substantially similar headsets for the wireless transmission of voice and data in the identical subheading. See, e.g., NY 246030, dated September

7 27, 2013; NY N022195, dated February 20, 2008; and NY N022222, dated February 19, 2008.

Heading 8518, HTSUS, which provides, in pertinent part, for, “headphones and earphones, whether or not combined with a microphone,” does not fully describe SCEA’s Headset because the heading text does not account for transceivers. As discussed above, transceivers enable the Headset to perform functions that distinguish it from the articles classified in heading 8518, HTSUS— namely, forming a wireless connection with the videogame console or ADP machine to transmit and receive voice and audio data and transmitting other data necessary for on-screen Headset battery and audio status displays.2 Further, CBP notes that prior CBP rulings classifying wireless infrared (IR) receiver headsets in heading 8518, HTSUS, are not dispositive of the classification of the SCEA Headset, because the technical characteristics and functional capabilities of such devices substantially differ from one another. See, e.g., HQ 089160, dated August 2, 1991; and HQ 950951.

In HQ 089160, CBP classified an IR stereo headphone system consisting of a cordless IR headphone receiver, an IR transmitter plugged into the headphone output jack on an audio or video component, and AC adapter in heading 8518, HTSUS, finding that “the frequency of oscillation of infrared is much higher than that of radiotelephony, radiotelegraphy, radiobroadcasting, or television” and consequently, is not encompassed by the terms of headings 8525, HTSUS, and 8527, HTSUS. 3 See also HQ 950591 (classifying a substantially similar IR stereo headphone system in heading 8518, HTSUS, and cited by the Port in the instant matter as basis for classifying SCEA’s Headset in heading 8518, HTSUS). Here, CBP notes that the EN to heading 85.17, HS, similarly describes “wireless networks” as including “radio-telephony” and “radiotelegraphy” networks, and does not include the term “infrared.” Moreover, unlike

2 In NY R00209, dated April 26, 2004, CBP classified the “AT&T Cordless/Cellular Headset EH 500” in subheading 8518.30.20, HTSUS, as headphones and earphones, whether or not combined with a microphone. However, because the 2004 ruling letter did not state whether the headset at issue in NY R00209 possessed a transceiver, CBP is unable to conclude that the SCEA Headset and merchandise in NY R00209 are substantially similar. As such, the NY R00209 is not dispositive of the classification of the instant SCEA Headset. 3 CBP notes that prior to 2007, heading 8517, HTSUS, provided for, “Electrical apparatus for line telephony or line telegraphy, including line telephone sets, with cordless handsets and telecommunication apparatus for carrier-current line systems or for digital line systems; videophones; parts thereof.” However, the HTSUS was amended in 2007, pursuant to 19 U.S.C. § 3005, to reflect changes recommended by the World Customs Organization, and the scope of heading 8517, HTSUS, was expanded to include, in pertinent part, “other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527, or 8528.” Additionally, the 2007 amendments deleted subheading 8525.10.80, HTSUS, (considered by CBP in HQ 089160 for the classification of the IR stereo headphone system), and moved certain articles formerly of heading 8525, HTSUS, to newly created subheadings under heading 8517, HTSUS. The proclaimed changes were effective for goods entered or withdrawn from warehouse for consumption on or after February 3, 2007. See Presidential Proclamation 8097, 72 Fed. Reg. 453, 2 (January 4, 2007). 8 the instant SCEA Headset, the IR stereo headphone systems in HQ 089160 and HQ 950591 were not capable of forming a wireless connection with an audio or video component, and the cordless IR headphone receivers did not transmit voice, audio, or other data to the audio or video component. As such, CBP concludes that the IR stereo headphone systems substantially differ from the SCEA Headset, and that rulings HQ 089160 and HQ 950591 are not dispositive of the classification of the instant merchandise.

HOLDING:

By application of GRI 1, (Note 3 to Section XVI, HTSUS), SCEA’s “Wireless Stereo Headset for Playstation®3,” Model No. 98085, is classified in heading 8517, HTSUS. Specifically, the Headset is classifiable in subheading 8517.62.00, HTSUS, which provides for, “Microphones and stands therefor; loudspeakers, whether or not mounted in their enclosures; headphones and earphones, whether or not combined with a microphone, and sets consisting of a microphone and one or more loudspeakers; audio-frequency electric amplifiers; electric sound amplifier sets; parts thereof: Other apparatus for transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network): Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus.” The column one, general rate of duty is free. You are instructed to APPROVE the protest.

In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any re-liquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.

Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

Myles B. Harmon, Director Commercial and Trade Facilitation Division